Why would anyone want to take on a large apartment complex and everything that comes with it? Because you can, and for most investors, we think you should.
First how, then why. The why won't matter if a 100-unit property doesn't feel within reach.
How investors get into large properties
For most people, the fastest and most practical way to invest in a 100-unit property is alongside an experienced investment team. In most cases that's a syndication: a sponsor finds, buys and operates the property, and passive investors put in capital alongside them.
Do your research. Have detailed conversations. Ask hard questions about the team, the property and the plan.
You might think you won't make as much as if you bought a property yourself. Many investors do well with passive investments like these, and they skip the late-night maintenance calls. Like any investment, returns aren't promised, so look closely at the assumptions.
Nine reasons bigger is often better
Here's why larger properties suit most investors who want cash flow, appreciation and tax benefits.
1. Economies of scale. Many expenses don't grow in step with the number of units. Property management, accounting, insurance, marketing, software and landscaping all spread across more doors.
2. Lower vacancy risk. In a 20-unit building, one vacancy is 5% of your income. In a 100-unit property, it's 1%.
3. Full-time, on-site management. Someone is on the property. Units lease faster, issues get fixed sooner, and residents like having someone there, which helps keep turnover down.
4. Better operating efficiency. Maintenance is more efficient, leasing moves faster, and you can build systems that run consistently.
5. More ways to add value. Small operational improvements make a real difference. Raise rents by $20 a month across 100 units and that's $2,000 a month, or $24,000 a year. At a 6% cap rate, that's about $400,000 of added value.
6. Better vendor pricing. Contractors like working on big properties, especially for the management companies that run them. We've learned that in hot markets, contractors get scarce and expensive fast, so lining up vendors early matters more than people expect.
7. Better financing. Rates tend to be better, and you're more likely to qualify for agency loans, which usually means non-recourse debt.
8. Better amenities. You can't justify a fitness center, pool or clubhouse at a 20-unit building. At a larger property they can attract residents and some can bring in income.
9. Better exit options. The pool of buyers for larger apartment properties is bigger: private equity firms, syndicators, investment funds and family offices. They compete for well-run properties.
What we actually look for
We're mainly interested in larger multifamily apartments, generally 50 units or more, mostly stable, in desirable communities. We see plenty of properties sitting at 20% or 30% vacancy. Some of those could be real opportunities for the right operator, but they're not what we'll take on. We'd rather pass on a deal with hair on it than stretch our underwriting to make the numbers work.
When the 20-unit makes sense
There are good reasons to buy the smaller building. You want to learn the business hands-on. You want a project for a family member. You don't want partners.
But if your goal is the most dependable path to building wealth in apartments, we'd look at a 100-unit property run by an experienced team, underwritten conservatively with worst-case rent growth and stress-tested exit assumptions built in from day one.
Curious how we evaluate whether a property is big enough to make the economics work? Schedule a call with John to talk through it.